Tag: Currency

As we’ve written before, bitcoin is just a cryptographically secure medium of exchanging value. It’s not “fraud” or a “vehicle for criminals”. At the core of bitcoin technology is a kind of super distributed ledger called the “blockchain.” The blockchain is public and accessible to anyone, just like the internet.

Many people don’t get bitcoin

As we’ve written before, bitcoin is just a cryptographically secure medium of exchanging value. It’s not “fraud” or a “vehicle for criminals”.

At the core of bitcoin technology is a kind of super distributed ledger called the “blockchain.” The blockchain is public and accessible to anyone, just like the internet.

Bitcoin can be moved around, used to buy goods and services and it has scarcity. Only 21 million bitcoin will ever be mined. And over 16 million have already been mined.

As an asset class, I would categorise bitcoin as similar to U.S. dollars, sterling, yen or any other currency. It is a form of currency. And as such, it should be looked at as something between say, dollars and gold.

Bitcoin also can’t be “closed”. It’s not an overleveraged credit derivative fund. It’s a highly secure distributed blockchain running on a global network of computers.

The other important thing to remember about bitcoin is that it’s not actually controlled by any central organization – the Federal Reserve, the Treasury, the Bank of England or the European Central Bank.

There’s no company, there is no CEO, there is no chief financial officer.

I think there’s every reason to believe that the importance of cryptocurrencies will grow over time simply because it is something that is not controlled by governments.

Bitcoin is becoming more mainstream… but there’s still upside

While bitcoin may still be misunderstood by most, it’s quickly becoming a topic in regular day-to-day conversations.

The favourite topics of dinner party conversations in Hong Kong and around the world have always been about property prices and airline travel. But I now see bitcoin and cryptocurrencies becoming part of the dinner party conversation.

But still, even people who are very financially literate, who have been in investment for many years, who are very up to speed with that’s going on in the world, have very little information or understanding of what these cryptocurrencies are. So although bitcoin is increasingly cropping up in conversation, very few of these people own any bitcoin.

That’s likely because buying bitcoin is still relatively cumbersome. Exchanges need to do know-your-customer (KYC) checks. Depending on where you live, funding a bitcoin account can require a trip to the bank and an expensive bank transfer. And you still need to familiarise yourself with a new asset class, which takes some effort.

But all that means is the opportunity is still there.

Now, I’m not saying bitcoin won’t be volatile. Like any asset, cryptocurrencies will continue to experience rallies and corrections. Don’t fall into the trap of thinking “this time is different” and that bitcoin will go up forever. The cryptocurrency could absolutely be in for a short-term price bubble. But over the long term, the upside is far from over.

If you haven’t already, buy bitcoin today

In short, I believe everyone should get some cryptocurrencies in their portfolio.

The most appropriate course of action for the majority of investors is simply to buy a little bitcoin – and forget about it. Don’t overreach and buy more than you can afford to lose, and certainly don’t borrow to buy bitcoin. Just buy, hold and ignore the volatility.

Participate financially, not emotionally. It’s not a one-way ride, and it’s a bumpy one. Be prepared to stomach big declines and sit tight. And “invest” no more than you can absolutely afford to lose… as much as you’d perhaps invest in a single speculative small-cap stock in your equity portfolio.

Bitcoin is an asymmetric bet… if it falls or even goes to zero, your loss is small (assuming you’ve put in only what you can afford to lose). But if over the next few years it continues go up, then gains of 10 to 20 times are entirely possible… and even bigger gains lie outside of bitcoin in the cryptocurrency space. There is no other asset class on earth that offers this kind of return profile.

So everyone needs to familiarise themselves with the process of buying, trading and storing cryptocurrencies. They’re here to stay. And being on the outside (and not understanding them) will limit your ability to profit from them.

Secretary of the Commonwealth of Massachusetts William Galvin says bitcoin “doesn’t pass the smell test.” “There is no product here. This is entirely speculation. That’s already been proven by the high gyrations of the value. It’s also subject to manipulation, because no one can explain it no one can …

Massachusetts’ top securities regulator said his office is qualified to issue a warning on bitcoin because the digital currency is “entirely speculation.”

“It doesn’t pass the smell test,” William Galvin, secretary of the Commonwealth of Massachusetts, said Wednesday on CNBC “Fast Money.”

“There is no product here. This is entirely speculation. That’s already been proven by the high gyrations of the value,” Galvin said. “It’s also subject to manipulation, because no one can explain it no one can control it.”

Bitcoin has soared more than 1,500 percent over the last 12 months to near $15,340 on Wednesday, according to Coinbase. That’s off a record high above $19,800 hit in mid-December.

Last Thursday, the Financial Industry Regulatory Authority issued an investor alert on “cryptocurrency-related stock scams.” Some tiny stocks with few ties to technology have soared several hundred percent in the last several weeks after announcing plans to focus on blockchain, the technology behind bitcoin.

Cryptocurrency proponents see blockchain as changing the world as much as the internet did. The technology eliminates the need for a third-party intermediary by creating a quick, permanent record of transactions between two parties. Bitcoin is the first application of blockchain.

CME, the world’s largest futures exchange, and its competitor Cboe both launched bitcoin futures in December. Many expect the futures will help legitimize bitcoin as an asset class, since the derivatives product will allow institutional investors to buy into the cryptocurrency trend.

Cryptocurrency experts noted recently that there seemed to be a rotation out of bitcoin and into other cryptocurrencies, such as bitcoin cash, ethereum and others, driven by the skyrocketing value of bitcoin. Bitcoin prices were already on the rise at the beginning of this year, but The Washington Post …

When bitcoin first arrived on the scene years ago, one of the concerns at the time was the use of it for transactions related to criminal activities, such as some of those conducted through the now-defunct darknet marketplace Silk Road. Then the FBI shut down Silk Road, and it seemed like blue skies for bitcoin. However, now we’re hearing that the cryptocurrency has another controversial group of users amid reports that extremists use bitcoin to dodge restrictions placed on them by tech companies and payment processors.

Extremists use bitcoin to dodge tech firms, payment processors

The violent Unite the Right rally over the summer in Charlottesville served as the tipping point for the pushback against the so-called “alt-right” movement. Following that rally, web hosting services and other technology firms attempted to sever a major artery for extremist groups: their ability to conduct transactions. Apple Pay and other tech firms were quick to publicize their move to stop supporting websites that sell merchandise targeting white supremacists, which led affected groups to look for alternate methods of payment to transact in.

On Tuesday, The Washington Post reported that extremists use bitcoin now to get around the tech industry’s crackdown, noting that prominent alt-right member Richard Spencer even described bitcoin as “the currency of the alt right.” The article seems to argue that extremists could be driving the latest bitcoin boom. At the very least, they are likely benefitting from the rally, if not driving it.

Who’s driving the bitcoin rally?

The recent bitcoin boom was put on ice temporarily, but another rally could be in the making as the price is back on the rise, triggering speculations about exactly who is fueling this new rally. Cryptocurrency experts noted recently that there seemed to be a rotation out of bitcoin and into other cryptocurrencies, such as bitcoin cash, ethereum and others, driven by the skyrocketing value of bitcoin.

Bitcoin prices were already on the rise at the beginning of this year, but The Washington Post notes that the sharp price increase in the cryptocurrency began in August. That does roughly line up with the timing of the crackdown on extremist groups by website hosting services, tech firms and payment processors, but does that actually mean that extremists are driving the rally?

A winning lottery ticket

Even though bitcoin prices have been volatile recently, anyone who started buying the cryptocurrency in August has enjoyed significant returns as its value has quadrupled. This month brought a broader legitimization of bitcoin as a number of mainstream markets started to support trading of it, and the price closed in on $20,000.

According to the Post, experts say the proceeds from sales of bitcoins purchased in August as a way to circumspect the crackdown on extremist groups can now be used for the same types of activities companies tried to prevent. On one hand, if extremists use bitcoin, they can turn a hefty profit by selling any coins they purchased in August.

On the other hand, the cryptocurrency makes it possible for groups to continue conducting business even if traditional payment processors have cut them off. Bitcoin is based on blockchain technology, a digital ledger that isn’t regulated and leaves no physical trace.

Spencer had told the Post that the alt-right has “faced enormous problems from being de-platformed.”

“Bitcoin at least, from what I can tell, is not something from which we can be de-platformed,” he also told the newspaper.

Dislike all bitcoin or just dislike some users of bitcoin?

It’s unclear how many extremists use bitcoin, although the Post states that the Southern Poverty Law Center was able to trace approximately 200 bitcoin wallets to extremists.

Not everyone is quick to trace bitcoin’s surging price to extremist groups. Earlier this month, Bitsonline argued that the link between white nationalists and bitcoin is “tenuous” at best. It also described such narrative as “dangerous and irresponsible,” adding that it could “end up hurting vulnerable demographics if it is allowed to propagate.”

It is true that anyone—even those cut off by traditional payment processors—can use bitcoin. As a result, the very nature of the technology makes it a prime currency for anyone who can’t use centralized money for any reason, whether it’s because the activities they are conducting are illegal, ethical or risky for some other reason. Bitsonline argues that the cryptocurrency can be of value to “under-served people exposed to extreme risk” just as much as it can for extremists or criminals.

“Losing sight of bitcoin’s usefulness because bad people use it is a lot like boycotting shoes or cars because bad people use them, too,” the blog states. “It’s utterly nonsensical.”

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The Monero and Ripple price has surged over the past 24 hours, while other cryptocurrencies including bitcoin and Ethereum fell by around 5 percent.

Extreme Premiums

Investors in the South Korean cryptocurrency market are driving the price of Ripple and Monero up, given that nearly every cryptocurrency in the local market are being traded with high premiums. Ripple and Monero are two of the few cryptocurrencies that are heavily concentrated in the South Korean market in terms of daily trading volume.

Bithumb alone, the second largest global cryptocurrency exchange based in South Korea, accounts for more than 35 percent of the market share of both cryptocurrencies. Korbit and Coinone, also process 10 percent of global Ripple trades, increasing the market share of the BTC-to-KRW trading pair in the global Ripple market to nearly 50 percent.

Currently, on both Bithumb and Korbit, Ripple is being traded at 1,592 KRW or $1.48. Given that the global average price of Ripple is $1.29, it is a premium of over $12.83. On Bithumb, Monero is being traded at $467, higher than the global average price of $391, with a 16 percent premium.

Price of various cryptocurrencies on Bithumb

Because of the substantial premiums on South Korean exchanges caused by a lack of supply, cryptocurrencies with trading volumes concentrated in the South Korean market tend to surge by larger margins and decline at a slower rate relative to other cryptocurrencies.

Ripple for instance, barely declined on December 23, when the entire cryptocurrency market plunged in value, with bitcoin, Ethereum, and Bitcoin Cash all experiencing over 30 percent drop in prices. While other cryptocurrencies fell drastically, Ripple declined by around 3 percent, remaining above $1.

As CCN previously reported, Litecoin creator and former Coinbase executive Charlie Lee stated that the South Korean cryptocurrency market has been pushing the price of bitcoin and cryptocurrencies like Ripple up for many months. Even bitcoin is being traded at $19,700 in the South Korean market, with a $4,000 premium over the global average price.

“I think increased regulation will help to reduce the volatility of the coin. A lot of the recent gains have had a lot to do with countries like (South) Korea and Japan really getting into the cryptocurrency space. Ever since China banned the bitcoin exchanges, (South) Korea has really taken up the mantle. There is a lot of frenzy in (South) Korea right now and I think that’s driving up the price,” said Lee.

Why are Premiums so High?

Cryptocurrency exchanges based in South Korea are very cautious in regards to the cryptocurrencies integrated on the platforms. Qtum for instance, underwent a rigorous process of market evaluation before the Bithumb development team came to a consensus to implement support for the cryptocurrency.

As such, Bithumb, Korbit, and Coinone, three of the largest cryptocurrency exchanges in South Korea, only support a handful of cryptocurrencies, and the cryptocurrencies that the three exchanges support are often traded with high premiums.

The demand for cryptocurrencies in South Korea is higher than any other regulated markets like the US and Japan, primarily due to the tendency of investors in the South Korean finance market to all-in on an asset which others are either invested in or is trending. The South Korean prime minister Lee Nak-yeon described such surge in demand for bitcoin as “cryptocurrency mania.”

There are groundbreaking technical updates on the way, such as the Lightning Network scaling solutions and the Deluge Network, which will allow bitcoin users to directly participate in initial coin offerings without first converting bitcoin into Ethereum-based tokens. Andy Bromberg, CEO of the ICO …

Bitcoin aficionados got an unexpected Christmas gift from the universe this year when bitcoin prices suddenly dropped below $13,000 last weekend then buoyed back up to around $15,800 by Wednesday morning. Many tokens across the cryptocurrency market fluctuated along with bitcoin, such as litecoin and monero. Veteran traders saw this as an opportunity to “buy the dip,” or stock up on digital loot .

Are you upset that Bitcoin's share of the whole crypto asset market is down to 50% even though the whole market has grown 3644% in the past year? This is cause for celebration, not jealousy at the success of other projects – the true competition is banks &amp; nation states!

For you who are long term investors like myself: (those who allways make the most returns), BITCOIN is still the crypto giant. It is at a low price, and will never be cheaper. It will be ten times this price in 2018. Remember – it has the lowest circulating supply of any coin.

“We’ll see the volatility clean up a little bit as the technology starts to mature,” Nathan Ross, co-founder of the blockchain startup Synapse, told International Business Times. “I see over the next four quarters it [bitcoin] continue to go up… when we see bitcoin go up by 10 percent, all the altcoins like Ethereum and litecoin, over the next few weeks they have a change that kind of matches that. So it will only grow the entire community.”

There are groundbreaking technical updates on the way, such as the Lightning Network scaling solutions and the Deluge Network, which will allow bitcoin users to directly participate in initial coin offerings without first converting bitcoin into Ethereum-based tokens. Andy Bromberg, CEO of the ICO platform CoinList, told IBT the Lightning Network plus increased attention from regulators will both have widespread impacts across the cryptocurrency industry. Bitcoin futures, blockchain-based derivatives, already made a splash with traditional players when they debuted in early December.

Meanwhile, mainstream financial institutions are rapidly adopting bitcoin’s foundational blockchain technology. The Australian stock exchange, for example, plans to switch to a blockchain system for settlement and clearing in 2018. “The movement of institutional capital into the space in all forms… endowments, hedge funds, etc., is something that is giving me a lot of hope in 2018,” Bromberg said. “Bitcoin and a lot of these other tokens have incentive layers on top of networks… I certainly see the widespread adoption of blockchain technologies as being beneficial to the uptake of cryptocurrencies that sit on top of these networks as well.”

Most experts predict bitcoin prices will continue to rise, albeit with temporary dips, throughout the first few months of 2018. This will drive up prices across the broader cryptocurrency ecosystem. “I think going into 2018 you’ll see a lot more diversification, on the part of professional investors in crypto,” Alexander Kravets, a veteran Wall Street trader turned CEO of the cryptocurrency startup XTRADE.IO, told IBT. “You’ll see less allocations in bitcoin and more allocations in alternative currencies, which is why you see a lot of run up on a lot of those. You’ll also see a lot more retail investment.”

Many experts, Kravets and Bromberg included, expect to see more legitimate infrastructure projects and products tailored to the cryptocurrency market in 2018, in stark contrast to this year’s publicity stunts. For example, the Long Island Iced Tea Corporation randomly added “blockchain” to its name and boosted stock prices in Q4. Bromberg said new adopters are learning how to ask more thoughtful questions about cryptocurrency and blockchain-based products. “The thing that’s most concerning to me is the signal to noise ratio,” Bromberg said.

“Next year, we’ll see some of these [legitimate] projects come to fruition, which will be exciting,” Kravets added. “It will separate some of the wheat from the stalk when it comes to the ICO market…it will be a year of actual products from the ICO space as opposed to promises.” Bromberg said the same concept applies to open source projects like bitcoin and monero as well. Yet he warned that misunderstood blockchain industry buzz, such as the iced tea company stunt, could continue to have a destabilizing effect on market prices as the cryptocurrency boom spreads.

All things considered, cryptocurrency experts expect bitcoin prices will continue to rise as these technologies achieve broader adoption through diverse use cases. “That will be great for legitimizing the space,” Kravets said.